Service charges from Freeholder seem unfair. Help!

scout59

Hi
I really hope someone out there can give us some advice on the following

My daughter bought a flat last year, it is a 1st floor flat, with one other flat on the ground floor of a street property house. When she bought the flat it was owned and managed by the same person/company. They have since sold hers and the other flat to an investment company, who have now passed management to a management company. My daughter and the owner of the other flat have just received their Service Charges bill for the year beginning 1st July 2015. There are a number of things that just don't seem right.

They are charging for buildings insurance (as expected) but the policy was taken out on 17th June 2015 and they have only just been sent a copy of the policy in September. So whether they agree with it or not, they're stuck with it, and it does seem high compared to the quotes the other owner had when she first bought her flat.

They are being charged a management fee and an audit fee. There is no mention of either in the lease. I don't know whether I'm being completely stupid here, but if the landlord was managing the property prior to selling it, then surely the new owners of the freehold are responsible for paying the management fee, as this was not in place when my daughter bought the flat and is not in her lease?

Also, I believe that there doesn't have to be an audit from the viewpoint of my daughter? From what I've read my daughter can ask to see invoices etc for any work done at the end of the year (and the management company can charge her for their time then...) and subsequently, if there is no work done by them, there will be no invoices to view and no need for an individual audit. But can they add this audit fee to the service charge as a matter of fact, whatever happens with repairs etc?

Should we be asking for a breakdown of the management charges?

My daughter is out of her depth here and not being a home owner I'm not much help. Her grandad who was going to advise her through all the legalities is seriously ill so we can't turn to him.

Any help or advice would be really appreciated....

Richard_Webster

The freeholder can only charge what the lease allows him to charge.

However there could be grey areas.

When you come to sell your buyer won't be interested when you say that although the freeholder is claiming £xxx arrears of service charges (the items you dsipute) they are disputed and he can't legally cliam them. Buyer's solicitor attitude will be that that might be the case but he is not having his buyer client get involed in the argument and "It seems the freeholder is being unreasonable so I'll advise my client not to proceed."

I mention that point about selling because it may seem a long time in the future but any disputes will have to be revealed then so you need to hink carefully about whether and how you challenge the charges.

scout59

Thanks Richard for the advice about future selling of the property. One worry I have at the moment though is that if they pay this now, then the management company will think they can just walk all over them - which seems to be their attitude.

The other owner has spoken to the management company now and he just said there's nothing they can do about it and they just have to pay as the costs are reasonable. However, I think she's just reacted to the large bill without facts...

But, thanks anyway. You've given us something to think about!

moneyistooshorttomention

I've seen several freeholder queries on here recently. They have often been advised to check out:

www.lease-advice.org/

and that makes sense to me to do so.

Personally, in your daughters' position - I would have taken the view that Richard Webster has just come up with basically, ie "If it aint in the lease - it does not apply and they aren't having it".

Time for your daughter to check her lease very carefully and then get in touch with this leaseholders advice service.

scout59

Thanks! That is what I'm thinking, management fees and audit fees are not mentioned in the lease - I've scrutinised it more than one today. It just says service charges and does not elaborate, except to say that the charges must be reasonable.

I've tried to call Lease this afternoon and can't get through. There is loads of advice on their website but I can't find anything that covers this particular problem. But will keep trying!

Thanks again

bouicca21

My lease includes a clause for buildings insurance. It does not include a clause for a management fee. Nor is there a clause for hiring a cleaner to look after the communal areas or someone to wash the windows. Yet the management company do all these things. Surely it comes down to what is reasonable? I don't object to a management fee, and I'm really pleased about the cleaner and the window washing. At my last place neither of these things got done - the communal hall was only cleaned if I did it and the windows were almost opaque with grime. I've got my gripes about other things, but I'm sure we can communicate and sort them out.

xylophone

It just says service charges and does not elaborate, except to say that the charges must be reasonable.

Is the new freeholder maintaining that service charges = management charge and audit charge?

If the term "service charge" is not defined in the lease, he might well be so doing?

As for "reasonable" - how is this to be defined?

With regard to insurance, what does the lease say about freeholder/leaseholder responsibility?

When I owned a leasehold flat, the lease required the freeholder to take out a policy to cover the roof and common parts and the leaseholders to take out individual policies to cover their own flats with the same insurer.

moneyistooshorttomention

I guess the term "reasonable" would be one of those things about what the "man on the Clapham omnibus" would consider reasonable?

I'm guessing there are comparison figures out there (perhaps a bit of mystery shopping with estate agents might reveal them??) and that could be adjudged against them?

I guess one of the questions to ask this leasehold advisory service is whether (as I suspect) a small claims court would judge what did or didn't constitute "reasonable" if it came to it?

scout59

xylophone wrote: »

Is the new freeholder maintaining that service charges = management charge and audit charge?

The management company Service Charges are for:
Insurance
Repairs/Maintenance
Management Fees
Audit Fees

There is nothing in the lease apart from Service Charges and it doesn't elaborate any further. So he may well have them on this. Although from what I have read, they don't have to pay for an audit if it isn't specified in the lease?
I have no idea what the management fees are supposed to cover. The management company do nothing except collect the Ground rent and the service charges, so far anyway. Should we be asking for breakdown?
They are saying that the charges ARE reasonable, but I wouldn't expect them to say any different!!

scout59

I suppose one thing I need to find out is what 'Service Charges' are allowed to cover and what has to be specified in order for them to claim them...

I find it hard to believe that a freeholder can just say that Service Charges will have to be paid and then throw any charge they want in there

moneyistooshorttomention

While you're on the subject of checking - it would be as well to see what sort of provision is laid down for annual "cost of living" rises on those "service charges".